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Fiscal Federalism, Subnational Governance and Mdgs in Nigeria

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Fiscal Federalism, Subnational Governance and Mdgs in Nigeria 1 AIAE RESEARCH PAPER 4 Fiscal Federalism, Subnational Governance and MDGs in Nigeria Eric Eboh 2 AIAE RESEARCH PAPER 4 Fiscal Federalism, Subnational Governance and MDGs in Nigeria Eric Eboh This publication is based on research carried out under the United Nations Economic Commission for Africa (UN-ECA) programme on the “The role of sub-national jurisdictions in efforts to achieve the MDGs in Africa”. An International Expert Meeting was held under the programme from May 6-8, 2009. 3 AIAE Research Paper 4: Fiscal Federalism, Subnational Governance and MDGs in Nigeria Published by : African Institute for Applied Economics 128 Park Avenue, GRA, P.O. Box 2147 Enugu, NIGERIA Phone: (042) 256644, 300096 Fax: (042) 256035 Email: [email protected] www.aiaenigeria.org First Published, August 2009 © African Institute for Applied Economics ISSN 079-4187 All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording or any information storage and retrieval system, without permission in writing from the copyright owner. 4 Table of Contents List of Tables ............................................................................................................................................ 7 List of Figures ........................................................................................................................................... 7 Abbreviations and Acronyms ....................................................................................................................... 8 About AIAE Research Paper Series ............................................................................................................ 9 SYNOPSIS ................................................................................................................................................. 10 1.0 INTRODUCTION ......................................................................................................................... 12 1.1 The Context ................................................................................................................................. 12 1.2 Objective of the Study ................................................................................................................. 14 2.0 METHODOLOGY AND SIGNIFICANCE OF THE STUDY ......................................................... 14 2.1 Data Collection ............................................................................................................................ 14 2.2 Analytical Framework .................................................................................................................. 14 2.3 Structure of the Paper ................................................................................................................. 15 2.4 Policy Significance of the Study .................................................................................................. 15 3.0 THE THEORETICAL DISCOURSE IN PERSPECTIVE ............................................................. 18 3.1 The Evolution of the Decentralisation Discourse ........................................................................ 18 3.2 Defining Decentralisation ............................................................................................................ 18 3.3 Forms of Decentralisation ........................................................................................................... 19 3.4 Unitary Vis-à-Vis Federal States: Opposite Sides of the Continuum .......................................... 19 3.5 Functional Spheres of Decentralisation ...................................................................................... 20 3.6 Decentralisation as an Economic Optimisation Tool ................................................................... 21 3.7 The Governance Value of Decentralisation ................................................................................ 21 3.8 Risks of Decentralisation ............................................................................................................. 22 3.9 Decentralisation and Institutional Factors– Accountability, Alignment and Coordination ........... 22 4.0 NIGERIA’S FISCAL FEDERALISM AND THE MDGs ................................................................ 23 4.1 Nigeria Federalism in Historical Perspective .............................................................................. 23 4.2 National-Level MDGs Indicators .................................................................................................. 24 4.3 MDGs-Oriented Reforms at the Federal Level ........................................................................... 25 4.4 Rising Revenue Profile of Sub-National Jurisdictions ................................................................. 26 4.5 Sub-National Governments Surpass Federal Government in Public Spending ......................... 28 5.0 MDGs IMPLEMENTATION AND MONITORING AT THE STATE LEVEL: SIX CASE STUDIES ..................................................................................................................................................... 31 5.1. Anambra State ............................................................................................................................. 31 5.2 Cross River State ........................................................................................................................ 33 5.3 Anambra State ............................................................................................................................. 37 5.4 Kano State ................................................................................................................................... 40 5.5 Osun State ................................................................................................................................... 42 5.6 Yobe State ................................................................................................................................... 44 5 6.0 FISCAL AND BUDGET MANAGEMENT CAPACITY AT THE STATE LEVEL .......................... 46 6.1 Weak Budget and Public Expenditure Management .................................................................. 46 6.2 States are too Dependent on Transfers from the Centre ............................................................ 47 6.3 State Governments’ Recurrent Spending Dominates Total Spending ....................................... 49 7.0 EXPLAINING SUB-NATIONAL VARIATIONS IN MDGs STATUS ............................................. 50 7.1 Differences across Geopolitical Zones ........................................................................................ 50 7.2 Differences across the States ..................................................................................................... 52 7.3 Relationship between MDGs Indicators ...................................................................................... 53 8.0 CONCLUSIONS AND POLICY IMPLICATIONS ........................................................................ 53 REFERENCES ........................................................................................................................................... 56 6 List of Tables Table 1: Outlook of Federal Government’s MDGs-related expenditure ........................................... 26 Table 2: Vertical allocation of Nigeria’s federally collected revenues since 1981 ............................. 27 Table 3: Government revenue as share of GDP ............................................................................. 28 Table 4: Government expenditure as share of GDP ........................................................................ 30 Table 5: Relative size of education and health expenditures of federal and state governments ...... 30 Table 6: Outlook of MDGs-related Expenditures in Anambra State, 2005-2007 .............................. 33 Table 7: Outlook of MDGs-related Expenditures in Cross River State, 2005-2007 .......................... 37 Table 8: Outlook of MDGs-related Expenditures in Jigawa State, 2005-2007 ................................. 39 Table 9: Outlook of MDGs-related Expenditures in Kano State, 2005-2007 .................................... 41 Table 10: Outlook of MDGs-related Expenditures in Osun State, 2005-2007 .................................. 44 Table 11: Outlook of MDGs-related Expenditures in Yobe State, 2005-2007 .................................. 45 Table 12: Performance of States in terms of Capital Allocations to SEEDS/MDGs priorities ........... 47 Table 13: MDGs status across Nigeria’s six geopolitical regions ..................................................... 51 List of Figures Figure 1: Share of state + local governments and federal government in total public expenditure (in per cent) ......................................................................................................................................... 29 Figure 2: Share of state + local governments and federal government in total public capital expenditure (in per cent) ................................................................................................................. 29 Figure 3: Internally generated revenue vis-a-vis aggregate state governments’ expenditure (in N’billion) .........................................................................................................................................
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